Selling house which is rented out
Hi Everyone, first use of his forum, hoping some kind people will provide some guidance/advice.
My son is currently thinking of selling his other house that is rented out at the moment. He has his own home with his wife that he lives in. He has lived in the rented house for a few years in the past. He acquired the house as part of a settlement with a previous partner when they split up.
He has asked me to look into his CGT liability for him. He previously had a normal residential mortgage on the property, but it was then changed to a buy to let mortgage a couple of years ago. Not sure if that makes any difference at all. He is under the impression that he can negate his CGT liability by buying another property i.e. a holiday static van, with the proceeds of the sale, and rent it out as a holiday let for income purposes, plus use it himself during the year as a holiday home. I'm pretty sure that isn't the case, just wanted to verify that fact independently for him.
I've read a lot of articles about the tax liability, but am still unsure of the facts as it is quite complicated - for me anyway ! His ex partner owned it initially for a number of years before they met, they lived together for a few years there, they then bought a another house together, it was then rented out for a number of years until they split up, and it was transferred to him, while she acquired the property they bought together, and lived there with his children. He then lived in the other property for a number of years again, then he rented it out when he bought another house with his new partner.
How can he work out the tax liability. Sorry I don't have actual figures, all I know is that he has about £45,000 after the mortgage is paid off. I'm guessing that it must have been remortgaged at some point, as I think the original purchase price was around £40,000. I realise that tax is liable on basically the sale price less the purchase price. Not sure if it's the original purchase price or whatever price it was recorded as in the settlement with his ex. I can't find anything to help him work out the tax under his circumstances. I'm hoping someone can give a rough guide on how to calculate it, or point us in the right direction to get more information.
I know it's a bit drawn out and complicated, but I wanted to give you as much info as possible. Thank you for persevering and reading it all, hopefully I can get a bit of clarity on what to do, and where to go next, from more knowledgeable people than myself.